Transport Optimization Through Reverse Logistics
Posted by Mr.Fakhruddin Sheik, Lecturer,HBS,GITAM University
Transport optimisation is a concept which recommends the best practices and techniques which are of best use with the available transport capacity in the operations management. This concept aims at maximising vehicle fill and productive time at the same time minimising empty vehicle running. European Efficient Consumer Response organisation explained certain techniques like unit load optimisation (including pallet height standards), multi-modal transport, vehicle technology, EDI, Supply Chain Optimisation Systems, Consolidation or Efficient Network Design (END) which will help to reach the goals of this concept of transport optimisation. (www.ecrnet.org)
According to the Logistics and supply chain consultancy Logistics Bureau, the optimal distribution network is to satisfy customer demand at specified service levels and at the lowest cost. The consultancy speaks of different features involved in the distribution network chain.
They are :
- Reduced distribution costs.
- Improved understanding of customer service needs and options.
- Improved understanding of service costs.
- Appropriate balance of storage, inventory and transport costs.
- Access to leading distribution network modelling tools and methods
The customers have been the prime focus and the retailers have to garner more importance towards their service levels. The retailers often come across complaints from the customers about a damaged product, and might return it back. Many a times the retailers are piled up with huge wastages and they return it back to the vendors. So, there is a need for a close coordination between customer, retailer and vendor. Reverse logistics has become an important concept now.
Levy and Grewal (2000), indicate that reverse logistics is where the merchandise is returned from a customer to a retailer and from a retailer to a vendor. Reverse logistics is expensive as it involves in carrying goods by occupying less room in a vehicle and vehicle utilisation falls down. Moreover retailers and vendors have to think ways of gaining better operational benefits by hiring a third party logistics.
Retailers are looking for bettering their benefits through transportation options as well. Freight consolidation is one of the options which bring a lot many frequent shipments together destined for a particular geographic region to one large single shipment. This can reduce per-unit shipping costs. Brennan’s (1996), has classified consolidation into three basic strategies; they are : 1.) Spatial 2.)Product & 3.)Temporal
Spatial consolidation speaks of determining which customer and vehicle routes have to be brought together to combine small shipments into a large shipment. Product consolidation is about getting mixed types of products into one shipment in order to increase the quantity sent to each customer per delivery. Temporal consolidation aggregates small orders across time to balance better customer service and high inventory cost against lowering shipment costs.